In this blog we will discuss the details of Withholding tax (will call it WHT from now) in case of SAP S/4HANA Central Finance (will call it CFIN from now). In coupe of sentences I will give a background on WHT
Tax that is charged at the beginning of the payment flow in some countries. Usually, the party that is subject to tax does not pay the withholding tax over to the tax authorities himself. When a customer that is authorized to deduct withholding tax pays invoices from a vendor subject to withholding tax, the customer reduces the payment amount by the withholding tax proportion. The customer then pays the tax withheld directly to the appropriate tax authorities
SAP have TWO types of solution:
- Classic WHT
- Extended WHT
Please refer to SAP help for the details & usage of these solutions.
In CFIN the WHT is support however there are some restrictions which needs to be considered.
Important Pre requisite – SAP S/4HANA CFIN supports ONLY Extended Withholding Tax. In all source company codes, for which withholding taxes shall be replicated to the Central Finance system, Extended Withholding Tax must be activated in the respective source system (& not classic WHT) although for those company codes or companies which do not use WHT at all this can be ignored.
Withholding taxes are calculated in the source system and transferred to the Central Finance system exactly as they are posted in the source system. They are never re-calculated in the Central Finance system. It is important to ensure that WHT configuration in both (source & CFIN) system is same although the customising codes can be managed via mapping.
In CFIN you can have below TWO cases:
Central Payment Is Activated:
If Central Payment is activated for a certain source company code, then the tax impact will be visible in the Central Finance system that are not anymore available in the source system and hence it calls for a need to do tax reporting from CFIN system and this is not just for WHT rather for all taxes. Also an important topic is Certificates. Certificate numbers are always generated in the Central Finance system so all certificate related settings needs to be done in CFIN system only.
Central Payment IS NOT Activated:
If Central Payment is not activated, then the CFIN system is just carrying the replicated data and in this case the source system should be used for any tax reporting.
Consistency check for WHT for ONGOING REPLICATION ONLY
During the replication of FI documents with withholding taxes to the Central Finance system, the system checks the withholding tax configuration and the below tables are compared:
- T059P (Withholding Tax Types)
- T059Z (Withholding Tax Codes)
- T001WT (Company Code Spec. Information per WHT Type)
- T001RWT (Rounding Rules for Company Code and WHT Type)
- T059MINMAX (Minimum and Maximum Amounts for WHT)
- T030 (Standard Accounts Table)
Result – If the configuration of customizing entities, like for example withholding tax types and withholding tax codes does not match in the source and the Central Finance system, the posting results in error in AIF that needs to be actioned upon.
Replication scenarios of WHT
Details of the fields involved in replication the structure can be referred to – ACCIT_WT
- Withholding taxes posted at the time of invoice (ongoing replication)
- Withholding taxes posted at the time of payment (ongoing replication)
- Withholding taxes in reversal documents
- Withholding taxes in the initial load of documents and open items
- Withholding taxes within document changes
- No Accumulation Transfer is possible
- If WHT without accumulation is needed then activate Central Payment can be activated and you can start WHT reporting and start preparing your WHT reporting in the Central Finance system. But if it’s used with accumulation the business processes needs to be revisited as it’s a CFIN limitation that accumulation data is not replicated to the CFIN system.
- If Central Payment is activated in the middle of the month or the middle of the year and monthly or yearly accumulation is in use then be aware that NO information about accumulated WHT for the past part of the month or year are available in the CFIN system. Therefore, it is important to consider that Central Payment is activated at the beginning of a month or year, depending on the use of accumulation.
- No Localization based on country specific requirements.
Important & Relevant SAP notes to be referred:
- 2184567 – Central Finance: Frequently Asked Questions (FAQ)
- 2623514 – Central Finance and Withholding Tax – SAP Notes
- 2771656 – Central Finance and Withholding Tax: Consistency Checks and Country Mapping
- 2292043 – Prepare source system for activating clearing transfer in Central Finance
- 2641045 – Central Finance and Withholding Tax with Initial Load – Source System
Happy reading and keep learning..